Know your rights: 3 tips for dealing with debt collectors
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Forgetting about paying off a bill is one thing, but prolonged missed payments can turn into a serious burden. However, if you find yourself in a difficult financial situation, know that predatory practices to collect that payment is illegal.
At TPG, we advocate for smart spending on credit cards, including paying in full to avoid interest on your balance. But it’s not always that easy — and unforeseen situations may arise, especially in light of the ongoing coronavirus pandemic.
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In a 2019 Consumer Financial Literacy Survey, one in four U.S. adults said there were instances where they did not pay their credit card bills on time. These late or missed bill payments can begin the process of credit card delinquency — and over time, could eventually lead to dealing with debt collectors.
If you find yourself in the precarious position of dealing with a debt collector, what are some things that you should know? Let’s walk you through it.
What are debt collectors?
Debt collectors are collection agencies, debt buyers and lawyers who regularly collect debts — from individuals like you — as part of their overall business. There are also dedicated companies out there that buy past-due debts from creditors and then attempt to collect them.
The assumption that debt collectors often use questionable — and sometimes even illegal — tactics isn’t wrong. The Consumer Financial Protection Bureau (CFPB), the agency responsible for financial consumer complaints, handled more than 75,000 debt collection grievances in 2019.
Debt collection is among the most prevalent and notorious topics of consumer objections about financial products or services, according to the CFPB.
Related: A guide to credit card debt
Why do you have to deal with debt collectors?
There are a couple of possibilities here. The first is that a credit card issuer (or other creditor) may use its in-house debt collectors or even hire a debt collection agency to collect a past-due debt that you owe. Debts sent to collections can include things such as:
- Credit card
- Car loan
- Medical/hospital bills
- Student loans
- Mortgage payments
Another potential factor is a debt collection agency may purchase a past-due debt from a creditor at a discount in the hopes they can profit off of the transaction by receiving the full payment from you.
Clearly, especially in the latter case, these collectors have a financial incentive to pursue payment — and sometimes that is done in a discriminatory or questionable manner.
Tips on how to deal with debt collectors
1. Know your rights as an individual
If you owe on a debt, it should be paid back. However, you should not have to tolerate practices that are meant to intimidate you into paying immediately. In 1977, Congress passed the Fair Debt Collection Practices Act to help you know when a debt collector has crossed the line.
These collectors can’t harass you, lie to you or manipulate you in any way to get the debt resolved. The Federal Trade Commission has a full list of what debt collectors can and can’t do when it comes to collections. Know that abusive, unfair, or deceptive tactics are off-limits.
2. Stay organized and get everything in writing
Make sure you know exactly what you owe and have that be clear at the onset from the creditor, not the debt collector.
Don’t do anything once you get that initial call either. A collector also has to send you a written “validation notice” within five days of first contacting you. The notice has to say how much money you owe, the name of the creditor you owe it to, and what to do if you don’t think it’s your debt.
If you don’t think you owe any money, you should send a debt collector a letter asking for verification of the debt. If you send the letter within 30 days of getting the validation notice, the collector has to send you written verification of the debt — like a copy of a bill that you supposedly owe — before it can start trying to collect the debt again.
3. Consider other options to repay
If at all possible, first try to work out an arrangement with your creditor before a bill is sent over to collections.
Another option if you’re having difficulty with collections is to seek out a nonprofit credit counseling agency. They may be able to help work something out with your creditors in terms of a repayment plan. If it’s looking unlikely you’ll be able to pay back your debts, or if debt collectors are hounding you, you could try to request a free consultation with an attorney that specializes in bankruptcy.
Even if you decide not to file for bankruptcy, the attorney can tell you what a creditor is allowed to do — and what they can and can’t collect on.
In an ideal world, by making all your monthly payments, you wouldn’t even have to get into a situation with debt collectors. However, if it’s already too late for that, it’s important to know your rights and how to spot predatory practices. Hopefully, with these tips, you can pay off what you owe, or at the very least get a better understanding of how to deal with debt collectors.
If you eventually become ready to apply for financial products again, take a look at our best secured cards and best beginner cards. Down the line, managing credit cards effectively can help you establish a better credit score, protect you from fraud and provide you the opportunity to earn valuable rewards.
Additional reporting by Benét J. Wilson
Featured photo by Sam Edwards via Getty Images
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